Fitch Rates Pima Co., AZ 2009A COPs 'A+'; Affirms GOs & Hwy Revs at 'AA-'; Outlook Stable

AUSTIN, Texas--(Business Wire)--
Fitch Ratings has assigned an 'A+' rating to Pima County, Arizona's (the county)
$20 million certificates of participation (COPs), series 2009A. Additionally,
Fitch assigns an 'A+' rating to the county's outstanding $24.4 million series
2008 and series 2009 COPs and affirms the 'AA-' rating on the county's GO bonds
and street and highway revenue bonds. The series 2009A COPs are scheduled to
sell via negotiation in early December. The Rating Outlook for all securities is
Stable.

The 'A+' rating on the COPs reflects the county's general credit
characteristics, a covenant by the county to include in the annual budget
sufficient funds to make all lease payments when due, the essential nature of
the leased property and the county's historical use of this financing vehicle
for capital improvements. The rating further incorporates the requirement for
the county to pay all maintenance expenses and taxes and to maintain property
and liability insurance on the leased property for the duration of the lease,
and the county's ownership of the leased property at the end of the lease term.
These elements are consistent with Fitch's lease rating criteria and support a
one-notch rating distinction below the county's general obligation (GO) rating.
Fitch currently rates the county's GO debt 'AA-' with a Stable Outlook.

The COPs are payable from lease payments from the county to U.S. Bank National
Association (the trustee); the lease payments are subject to annual
appropriation. The series 2009A COPs (as well as the series 2008 and series 2009
COPs) are issued pursuant to a lease-purchase agreement originally dated June 1,
2008 between the county and the trustee, and all three series also are governed
by a trust agreement originally dated June 1, 2008 between the county and
trustee. The trustee's security interest allows it to repossess and sell or
re-let the leased property in the event of default. The leased property consists
of certain interests in major portions of the county public works building and
garage, and the county legal services building. The series 2009A COP proceeds
will be used to finance technology improvements for several county departments.
The estimated value of the leased property at more than $50 million exceeds the
outstanding amount of the three COP series.

The county recorded a string of positive general fund results from fiscal 2005
to fiscal 2008, and the unreserved fund balance nearly doubled from $33 million
to $65 million during that period (although transfers in for debt service
contributed significantly to the increase); the fiscal 2008 unreserved balance
represented nearly 13% of spending and transfers out. In recognition of the
weakening economy, county administrators in the fiscal 2009 budget reduced
departmental spending by 5% (with the exception of the sheriff) and followed
this move with an additional 2.5% administrative spending reduction and a
mid-year across-the-board 2.5% cutback in all general fund departments. The
result of these actions was year-end results that met original budget targets.
The anticipated fiscal 2009 unreserved general fund balance, which was adjusted
for a nearly $30 million transfer out for debt service, is satisfactory at $35.8
million or about 7% of spending.

Fitch credits the county with extending the fiscal 2009 spending reductions into
the fiscal 2010 budget, which along with other cost saving measures enabled
officials to propose a nearly eight cent reduction in the primary (operations)
tax rate and set aside $15 million in a budget stabilization fund to pay for
additional healthcare-related outlays. These steps were taken as projections of
intergovernmental revenues from the state continued to drop. Intergovernmental
monies, which are the second largest general fund revenue source, peaked in
fiscal 2007 at more than $152 million and by fiscal 2009 had shrunk to $132
million; the budgeted amount for fiscal 2010 was less than $129 million, or
roughly 15% below the fiscal 2007 total. Given the ongoing recessionary
pressures in Arizona, Fitch believes the close monitoring and prompt action
displayed by county administrators during fiscal 2009 will be critical over the
next several years to preserving adequate reserves and maintaining the current
rating level.

County overall debt ratios are moderate at about $1,500 per capita and 1.9% of
fiscal 2010 market value. Payout of GO debt is rapid with more than 80% repaid
in ten years. General government capital needs through fiscal 2014 appear
manageable at roughly $380 million, which is less than the $490 million included
in the previous plan. County officials expect 85% of the needs to be
debt-funded. The county plans to sell $113.1 million series 2009A GO bonds and
$23.3 million series 2009 street and highway revenue bonds later this month.

With a population of more than one million, Pima County is home to Tucson,
Arizona's second largest city. Fitch cites as a positive credit factor the
area's historically diverse economy, featuring higher education, healthcare,
government, technology, tourism and manufacturing as primary anchors. Major
southern Arizona employers include Raytheon Missile Systems (11,500 employees),
the University of Arizona (10,575), the State of Arizona (9,300), Davis-Monthan
Air Force Base (7,500), the U.S. Army Intelligence Center & Fort Huachuca
(6,500), and Freeport-McMoRan Copper & Gold Inc. (6,000).

After a series of annual increases dating back to 2000, county employment levels
dipped 1% in August 2009 compared the prior year period, and unemployment jumped
from 5.8% to 8.2%; this level remained below the state and national averages,
however. While the housing sector has weakened considerably, residential
foreclosure and delinquency numbers are below U.S. averages and well below those
of the Phoenix market due to less speculative building in the Tucson area over
the past decade. County tax base growth, which has been steady in recent years,
is expected to register declines of around 4% in each of the next two fiscal
years as eroding property values impact the tax roll. Full cash value for fiscal
2010 is $80.7 billion, up 1.8% from the prior year.

Additional information is available at 'www.fitchratings.com'.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS.
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING
DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE
AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF
CONDUCT' SECTION OF THIS SITE.

Fitch Ratings
Steve Murray, +1-512-215-3729 (Austin)
Rebecca Moses, +1-512-215-3739 (Austin)
Media Relations:
Cindy Stoller, +1-212-908-0526 (New York)
cindy.stoller@fitchratings.com

Copyright Business Wire 2009